Barclays picks reasonably valued, aftermarket-focused businesses among mining equipment stocks

Epiroc AB

02/08/2024 12:44

** Barclays expects mining equipment growth to be
"unexciting" and sees that reliable but slow brownfield-driven
growth favours reasonably valued, aftermarket-focused businesses
    ** The broker sees only low single-digit volume growth for
the addressable market (global ore processing), and little sign
of a capex cycle
    ** It expects secular drivers limited to copper (and
counterbalanced by risks), and slowing momentum behind
electrification/automation
    ** Barclays double upgrades Sandvik  SAND.ST  to
"overweight" from "underweight" following underperformance of
about 11% relative to industrial goods and & services STOXX 600
index  .SXNP  over the past three months, and sees risk to
consensus estimates to be the smallest across its coverage of
the sector
    ** The brokerage downgrades Metso  METSO.HE  to
"equal-weight" from "overweight" as high net working capital
(including inventory) is a risk to margins and CEO succession
suggests a better entry point is possible later in the year    
    ** It keeps "overweight" rating on Weir  WEIR.L  seeing the
company's EBITA margin expansion profile as the most compelling
among its coverage
    ** It maintains "underweight" on Epiroc  EPIRa.ST  as
potentially softening electrification and automation
trajectories make it hard to justify capital allocation towards
M&A in those areas

 (Reporting by Marta Frąckowiak)
 ((marta.frackowiak@thomsonreuters.com))